Poll: 2017’s growth target in the bag

ECONOMISTS expect the country’s economic growth to have stayed robust and on target in 2017 on the back of higher household and government spending, albeit easing from 2016 as a widening trade deficit may have capped overall expansion.

A poll of 12 economists yielded a gross domestic product (GDP) growth estimate median of 6.7% for both the fourth quarter and full year 2017, slowing from the government’s 7.0% upgraded third-quarter estimate, but slightly faster than the 6.6% notched in 2016’s final three months. The median forecast also compares to 2016’s 6.9% growth that was the fastest in three years.

This puts the growth pace near the low end of the government’s 6.5%-7.5% target band for 2017. The Philippine Statistics Authority is scheduled to release the official GDP data tomorrow.

In a note last Friday, Moody’s Analytics gave a 6.7% fourth-quarter estimate, saying that domestic demand “likely remained the major driver of growth” as households continued to benefit from steady inflows of remittances from overseas Filipino workers as well as a “healthy labor market.”

Socioeconomic Planning Secretary Ernesto M. Pernia had said in the National Economic and Development Authority’s year-end press briefing last month that he expects growth in 2017 to be “at least 6.7%” and the fourth-quarter pace faster than that, with government spending, exports, consumer spending and improved agriculture output driving growth for the fourth quarter.

Economists polled late last week by BusinessWorld shared Mr. Pernia’s optimism, even as some clarified that a widening trade deficit could have capped fourth-quarter and full-year economic expansion.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, estimated 6.7% economic growth for the quarter and full-year 2017: “[Fourth quarter] growth is based on robust growth from holiday domestic consumption and increasing public and private investment on infrastructure development,” he said.

For Mr. Asuncion, the supply side would see services “outdoing” industry and agriculture. “Agriculture might have given a boost to overall growth picture because of a favorable year for harvests in general. Manufacturing may have also been a huge driver for industry in [the fourth quarter].”

Emmanuel J. Lopez, chairman of the University of Santo Tomas Department of Economics, also gave a 6.7% estimate for the quarter and the whole of 2017, citing “increased demand brought about by holiday festivities” in the fourth quarter, “robust expenditures in infrastructure development” and the consistent growth of OFW remittances last year.

‘SIGNIFICANT OFFSET’
For ANZ Research economist Eugenia Fabon Victorino, Philippine economic growth “remains robust”, noting that “[a]lthough, momentum in industrial production has been easing, the rise in government spending should have provided a significant offset. Several infrastructure projects broke ground in the last quarter raising employment opportunities.”

Ling-Wei Chung, principal economist at IHS Markit, shared this assessment, saying: “With the government pledging an ambitious infrastructure program, the main support to GDP growth continues to come from government and investment spending.”

The government spent a total of about P2.494 trillion as of end-November last year, 10% more than the P2.266 trillion spent in 2016’s comparable 11 months.

Furthermore, Department of Budget and Management data showed infrastructure and capital outlays growing 44.8% in November — its fastest pace so far in 2017 — to P43.8 billion from P30.3 billion in 2016. That brought January-November disbursements on the same times to P486.5 billion, 14.2% up from P426.1 billion in 2016’s corresponding period.

“This factor, coupled with favorable liquidity conditions, buoyant domestic sentiment, and steady remittance inflows will render support to domestic demand,” Ms. Chung said.

KEY RISK
Some economists, however, cited the country’s worsening trade balance as a risk to economic growth.

Latest government trade data showed that the import growth rates of 13.1% and 18.5% in October and November, respectively, outpaced that of exports which grew 7.1% and 1.6% in those two months. These contributed to bringing the cumulative trade gap to $25.705 billion — a level not seen in decades.

“The expansion of the Philippine economy likely slowed to 6.4% last quarter from 6.9% [the government revised this slightly upward to 7.0% on Friday] in the third quarter of 2017 as the surge in imports and the slowdown in exports intensified the negative contribution of net trade to the country’s GDP,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

IHS Markit’s Ms. Chung noted that “with infrastructure spending boosting import growth, a widening trade deficit will likely weigh on net exports and provide some constraints to GDP growth in Q4 2017 and during the near term.”

‘NOT AT ALL CONCERNING’
For UnionBank’s Mr. Asuncion, however, the trade deficit is “not at all concerning,” describing it as a “consequence of an emerging shift toward more investments rather than mere domestic consumption-led economic growth.”

Angelo B. Taningco, economist at Security Bank Corp., put GDP growth at 6.5% in the fourth quarter and a 6.6% for the full year print, saying that in addition to the trade deficit, there are also “signs of slowdown in agricultural production amid adverse weather conditions such as tropical storms and typhoons during December…” as well as moderation in consumer spending due to higher inflation. — Ranier Olson R. Reusora